Overview – Iraq's Logistics & Transport Sector 2025
Iraq’s logistics and transport sector is on the rise. With an expected market volume of around USD 7.7 billion in 2025 and an annual growth rate of 6.2%, the market offers numerous opportunities for German companies. Major infrastructure projects such as the “Development Road” corridor and the Grand Faw Port are driving a growing demand for modern infrastructure, digital logistics, and sustainable solutions.
AHK Iraq supports German companies with market analyses, local partnerships, and targeted advisory services to ensure a successful market entry.
Iraq’s logistics sector is a key driver of trade facilitation and national reconstruction. In 2025, the market expanded by 6.9% compared to the previous year. Projections indicate the sector will surpass USD 10.4 billion by 2030. While road freight remains the dominant mode, segments such as air cargo, warehousing, and e-commerce logistics are experiencing the most rapid growth. Iraq’s economic momentum and strategic location position it as an emerging regional logistics hub.
Growth Drivers
- Infrastructure Revitalization: Significant investments in ports, railways, and highways.
- Diversified Economic Activity: Growth in automotive, construction, retail, and agriculture logistics.
- E-commerce Expansion: An emerging online retail sector demands efficient last-mile delivery and warehousing.
- Oil Sector Logistics: Ongoing investments and mega-projects continue to drive high-volume, specialized logistics demand.
- Young Consumer Base: A growing population with high digital engagement is shaping logistics demand across sectors.
Transport Segments
- Road Freight: Dominates inland cargo movement. Benefits from recent road upgrades and regional connectivity improvements.
- Air Freight: Fastest-growing segment with a projected CAGR of 7.6%, driven by high-value and time-sensitive cargo.
- Maritime Shipping: Seeing moderate growth as port infrastructure expands, notably at Grand Faw Port.
- Rail Freight: Currently limited, but poised for growth with the Basra–Shalamcheh rail and Development Road corridor.
Key Projects
- Grand Faw Port: A mega-port under construction, set to transform Iraq’s maritime capacity and reduce reliance on regional transshipment hubs.
- Development Road: A multimodal corridor from Basra to Turkey, enhancing Iraq’s role as a regional trade bridge.
- Rail Links: Projects linking Iraq to Iran and potentially Europe via Turkey are underway.
- Airport Upgrades: Expansion of Baghdad International Airport and regional hubs to support growing air cargo demands.
Role of German Companies & Opportunities
German expertise in logistics, transport infrastructure, and supply chain technology positions companies well to support Iraq’s modernization. Business opportunities for German companies include:
- Public-private infrastructure development.
- Advanced warehousing systems.
- Digital freight and transport management solutions.
- Cold chain logistics for food and pharmaceuticals.
- Engineering and consulting services for complex logistics operations.
Infrastructure & Investment Outlook
Iraq is prioritizing investment in logistics capacity through PPPs, international cooperation, and integration with regional transport corridors. China’s Belt & Road Initiative and growing Gulf engagement complement Iraq’s vision of becoming a regional logistics hub. In the medium term, Iraq is expected to expand its role in East-West trade through improved road, port, and rail connectivity.
Challenges & Mitigation Approaches
- Customs and Bureaucracy: Continued reform is needed to streamline trade processes.
- Security & Infrastructure Gaps: While improving, security and infrastructure still pose operational risks.
- Fragmented Market: Quality and reliability vary significantly across providers.
- Training and Standards: Workforce development and service quality standardization are essential for long-term sector growth.
Regulatory Landscape
Ongoing efforts to modernize customs (e.g., ECTN, TIR), harmonize regulations with the Kurdistan Region, and attract private investment are improving the operating environment. WTO accession efforts also signal long-term liberalization. With support from the international community, Iraq is slowly building an environment more conducive to trade and logistics growth.
SWOT Analysis
Strengths:
- Strategic Location: Positioned at the intersection of Asia, the Middle East, and Europe, Iraq offers potential for cross-continental transit.
- Oil-Funded Infrastructure Investment: High oil revenues are enabling large-scale investment in transport and logistics infrastructure.
- Population Dynamics: A youthful population with rising consumer demand boosts internal distribution and e-commerce growth.
- Government Commitment: Strong political focus on modernizing transport systems and integrating with regional trade corridors.
Weaknesses
- Institutional and Regulatory Complexity: Iraq’s logistics environment is hindered by overlapping authorities, slow customs clearance procedures, and fragmented regulatory enforcement, resulting in high dwell times and inconsistent operational performance across regions.
- Underdeveloped Rail Network: Rail freight infrastructure remains outdated and operationally limited.
- Fragmented Domestic Market: A large number of small, unstandardized logistics operators limits service reliability and scalability.
- Overreliance on Oil: Logistics demand and investment are tied to oil price fluctuations and government budget cycles.
Opportunities
- Transit Corridor Leadership: Grand Faw Port and the Development Road position Iraq to become a regional logistics hub.
- E-Commerce & Retail Expansion: Rapid growth in online shopping creates strong demand for parcel delivery and fulfillment services.
- German Technology & Know-How: German firms can lead in warehouse automation, fleet management, and customs digitization.
- Cold Chain Development: Demand for refrigerated transport in food, health, and agriculture is rising with urbanization.
- Digital Leapfrogging: Iraq can bypass legacy systems by adopting modern, tech-driven logistics infrastructure.
Threats
- Security Disruptions: Although improving, certain regions still face risks from localized unrest or organized crime.
- Regional Competition: Neighboring countries (e.g., Iran, UAE) are also competing to be regional logistics gateways.
- Climate Vulnerability: Extreme heat, dust storms, and flooding threaten infrastructure durability and operational efficiency.
- Global Economic Fluctuations: Geopolitical tensions or downturns in global trade could delay investment and reduce volumes.
Key Insights:
- Iraq has the largest potential market among the four, driven by reconstruction and oil-funded infrastructure.
- Oman leads in port performance and operational efficiency, particularly in maritime freight.
- Kuwait offers better retail and e-commerce infrastructure, but limited diversification in logistics.
- Jordan is focused on regional integration and pharmaceutical logistics, supported by better regulatory frameworks.
Conclusion: While Iraq currently lags in logistics efficiency, its strategic projects like the Development Road and Grand Faw Port could dramatically alter its standing by 2030. For German firms, Iraq represents a high-reward, high-effort market compared to its neighbors.
Future Outlook
By 2030, Iraq is expected to evolve into a key overland logistics corridor connecting the Gulf with Europe. This shift presents logistics companies with a strategic alternative to the Suez Canal, along with opportunities to establish warehousing hubs along emerging trade routes.
If major infrastructure initiatives, such as the Development Road and the Grand Faw Port, achieve full operational capacity, Iraq could become a pivotal logistics gateway between Asia and Europe.
As the sector advances, sustainability is gaining prominence. Although ESG (Environmental, Social, and Governance) practices are still in their infancy in Iraq, there is growing recognition of the long-term value of sustainable logistics, particularly in areas such as energy efficiency, emissions reduction, and waste management.
German companies are well-positioned to lead this transformation. Innovations like electric delivery fleets, solar-powered warehouses, and green fleet management systems offer compelling opportunities for early adopters. Moreover, digital solutions that optimize routes and reduce fuel consumption support both environmental objectives and operational cost savings.